Moody's: Sears' and Kmart's shutdown is imminent

A Kmart store in Richmond, Virginia. Business Insider/Hayley Peterson Moody's analysts say Sears and Kmart don't have enough money — or access to money — to stay in business.

In a note published Wednesday, the analysts downgraded Sears' liquidity rating, saying the company is bleeding cash and will have to continue to rely on outside funding or the sale of assets, such as real estate, to sustain operations.

"We recognize the risks associated with relying on these sources and continued shareholder support to finance its negative operating cash flow which is estimated by Moody's to be approximately $1.5 billion this year," the analysts wrote.

Kmart in particular is at risk of shutting down, according to Moody's.

"The ratings... reflect our view on the uncertainty of the viability of the Kmart franchise in particular given its meaningful market share erosion," the analysts wrote.

A worker unpacks televisions at a Sears store in Schaumburg, Illinois near Chicago. Reuters Sales have been falling for years.

Sears' sales dropped from $41 billion in 2000 to $15 billion in 2015.

Kmart, which merged with Sears in 2005, has seen its sales plunge from $37 billion to $10 billion in the same period.

Moody's analysts noted that Sears has a sizable asset base, but "its debts are significant with approximately $3.5 billion of funded debt as well as an unfunded pension and post-retirement obligation of $2.1 billion."

The company's minimum pension contributions are an immediate threat to its cash flow. In 2016 and 2017, minimum pension contributions total approximately $596 million, analysts said.